DuPont lowers 2009 target, plans more cost cuts

First-quarter profit falls 59%, but is still above the Wall Street consensus

By

ChristopherHinton

NEW YORK (MarketWatch) -- E.I. du Pont de Nemours & Co. said Tuesday it would get more aggressive in cutting fixed costs -- lifting its reduction target to $1 billion from $730 million -- after adopting a more pessimistic view of the economic recession in the wake of a 59% plunge in first-quarter profit.

The plastics and materials manufacturer also reduced its planned capital spending for the year to $1.4 billion from $1.6 billion.

"We remain committed to take steps that will keep DuPont ahead of the weak economy," said Chief Executive Ellen Kullman in a call with analysts. "We are reducing additional contractor positions, expanding work schedule reductions companywide and developing additional restructuring plans and we made further reductions in capital spending."

Furthermore, the Dow Jones 30 component
DD, +1.16%
said it would keep its quarterly divided at 41 cents a share, and noted its net debt is slightly lower than it was a year ago.

Shares of Wilmington, Del.-based DuPont closed up 5% at $28.06. Following the financial crisis that began in mid-September, the stock fell more than 60% to a near 20-year low of $16.05 on March 9.

DuPont lowered its full-year earnings projection to $1.70 to $2.10 a share from $2 to $2.50 a share announced in January, bringing it more in line with the Wall Street consensus of $1.93 a share, according to data compiled by FactSet Research.

Kullman said the chemical giant reset its expectations for the year to reflect a deeper recession, with the outlook for a global gross domestic product decline of 2.5%, compared to 0.6% predicted in January.

The outlook for global motor vehicle builds were lowered to about 58 million from 68 million, and U.S. housing starts is now expected to be 560,000 units, compared to 720,000 units.

"The economic environment and demand scenario will remain challenging in the near term," said HSBC analyst Hassan Ahmed.

'Difficult market conditions'

For the first quarter, DuPont said it weathered a severe decline in global industrial demand that affected such key end markets as construction, auto production and consumer goods.

Profit was slightly better than Wall Street's expectations, with DuPont reporting net income of $489 million, or 54 cents a share, down from $1.2 billion, or $1.31 a share, earned in the same period during 2008.

Analysts had expected the company to earn 53 cents, on average.

Total sales for the quarter also fell, dropping to $7.27 billion from the prior year's $8.77 billion, primarily as a result of lower volumes.

"Results proved strong along agriculture and pharmaceutical lines; however, they were negatively impacted by the sharp decline in global GDP," HSBC's Ahmed said.

A plunge in construction and motor-vehicle demand led to a loss for DuPont in the fourth quarter and prompted a prior cut to its 2009 outlook, down to a range of $2 to $2.50 a share against earlier views between $2.25 and $2.75 a share. Read more.

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